Page last updated at 00:07 GMT, Wednesday, 2 December 2009

Industrial success fails to lift Bhopal

By Jorn Madslien
BBC News, Bhopal, Madhya Pradesh

HEG worker lifting graphite electrodes
HEG is one of the world's largest producers of graphite electrodes

A glowing hot cylinder-shaped graphite electrode is lifted by a giant claw, controlled remotely by an overall-clad man.

The worker is wearing a mask to protect him from inhaling the dust that fills the air, though breathing is still difficult in the stifling heat.

It is a dirty, exhausting job, yet staff turnover at the factory is exceptionally low.

Hindustan Electro Graphite (HEG) is not only the dominant company here in Mandideep, an industrial town on the outskirts of the central Indian city Bhopal. It is also the largest industrial company in the entire state of Madhya Pradesh.

That makes the company a very attractive employer, according to chief operating officer Jacob Mani.

Rapid growth

Making the electrodes, which are used as carriers of electricity to heat steel furnaces, is essentially a complex process of mixing petroleum pitch and petroleum coke, a crude oil by-product.

HEG workers
Pay for workers accounts for just 2% of HEG's total costs

HEG makes about 66,000 tonnes of the stuff, up from about 20,000 tonnes in 1984, and has plans to raise production to 80,000 tonnes over the next couple of years.

This makes it Madhya Pradesh's best home-grown success story, one that manufactures and exports to steel makers across the globe.

"This is the largest graphite electrode plant in one location in the world," Mr Mani says, as a group of workers covered in a filthy black dust shovel petroleum coke off the back of a big truck.

"We cater for 6% of global demand."

Biggest employer

Mr Mani was there from the start when HEG was established more than three decades ago in what he describes as a desert on the outskirts of Bhopal.

HEG chief operating officer Jacob Mani
The advantages when we started up have disappeared today
Jacob Mani, chief operating officer, HEG

"In 1976, we were the only industry here," he says. "There were just 6,000 people living here."

Since then, Mandideep's population has shot up at least tenfold, in line with both HEG's growth and the subsequent influx of some 400 industrial companies that include a soap factory, a tractor factory and a food factory.

Many of the companies that have based themselves here have been very successful, yet neither their individual success nor the growth of the town should be seen as a sign of successful industrialisation.

HEG remains the biggest employer here, even after increasing automation has meant its workforce has been reduced to about 1,000 people.

And there is only one other company that exports anywhere near as much, namely Lupin Pharmaceuticals which has a manufacturing plant here.

Dominant companies

In a file picture taken on December 4, 1984, blinded victims of the Bhopal tragedy sit in the street and wait to be treated at Bhopal hospital after a deadly poisonous gas leak from the Union Carbide factory.
Initial deaths (3-6 December): more than 3,000 - official toll
Unofficial initial toll: 7,000-8,000
Total deaths to date: over 15,000
Number affected: Nearly 600,000
Compensation: Union Carbide pays $470m in 1989

Source: Indian Supreme Court, Madhya Pradesh government, Indian Council of Medical Research

Mandideep's total exports are worth some 2,300 crore rupees ($500m; £300m) per year, according to Mr Mani, making it the largest industrial area in Madhya Pradesh. Some 4,000 crore rupees have been invested here over the years, according to one estimate.

HEG and Lupin each exports some 900 crore rupees per year, Mr Mani estimates. That means the value of the exports of all the remaining companies here is just 500 crore rupees.

Ever since a deadly gas leak at a Union Carbide factory in Bhopal on 3 December 1984, the city has been starved of large-scale private investment.

"Today, Bhopal is synonymous with that disaster - nothing else," says Mr Mani. "All the publicity that's come out of this has been negative against multinationals."

During the 1980s, the Madhya Pradesh State Industrial Development Corporation set out to attract investors by offering them ready developed industrial land and vastly improved roads.

Yet the state has failed to see Bhopal emerge as an engine for industrial growth in the state, even though both the cost of land and the cost of labour here are the lowest in India.

No longer ideal

Moreover, if HEG had been created today it would not have been located here, Mr Mani says.

Truck on road in Mandideep
Better roads have helped attract more firms to Mandideep

"The advantages when we started up have disappeared today," he explains.

HEG was initially set up to serve domestic customers, so Bhopal's central location was seen as an advantage, and generous government subsidies made it more attractive to come here.

But today, the poor infrastructure and the distance from India's ports pose a problem since the company imports 80% of its raw materials and exports 80% of its final product.

Madhya Pradesh's energy shortages add to the list of disadvantages of being located here. Electricity accounts for 32% of HEG's costs - even though it has its own power plant on site that sells surplus electricity to the grid.

Cheap labour is not much of an advantage to the company as it accounts for no more than 2% of its costs.

As a consequence, HEG's growth here is capped by its 80,000 tonnes capacity. Once that is reached, the company aims to build a factory in China or the Middle East to continue its expansion.

"As a strategy, we should have a presence in these areas," says Mr Mani.

But HEG has no plans to pull out altogether and Mr Mani eagerly insists that, for companies in other industries, Bhopal is one of the best kept secrets in the world.

"I believe that what Madhya Pradesh has to offer as a state exceeds what's on offer in many countries that are already doing very well," he says.

"Only, nobody knows what Bhopal really is."

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